Bidder Inc. has 5 million shares outstanding and a share price of $85. The company...
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Bidder Inc. has 5 million shares outstanding and a share price of $85. The company wants to buy Target Inc., which has 3 million shares outstanding and a share price of $42, at a price that represents an 20% acquisition premium over the pre-announcement share price of Target. Bidder is going to pay for the acquisition by issuing new shares, and there are no transactions costs or expected synergies. Assume that everyone assumes that the takeover will go through with certainty. 1.What is the stock price of Target immediately after the announcement? 2. What is the stock price of Bidder immediately after the announcement? 3. What is the stock price of the combined company immediately after the takeover
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